SaaS Sector Rebounds on AI Momentum: 3 Stocks to Watch

Key Points

Over the past few years, software-as-a-service (SaaS) stocks have faced significant headwinds. The prevailing narrative suggested that artificial intelligence (AI) could undermine the software layer or disrupt traditional user-based pricing models. Despite consistent growth, investor skepticism persisted until recently, when the sector began showing signs of recovery.

With the market turning a corner, here are three SaaS companies strategically positioned to capitalize on the AI boom.

1. Microsoft: Leading the AI Integration Charge

Microsoft (NASDAQ: MSFT) has been at the forefront of AI adoption, investing heavily in OpenAI and integrating AI into its core offerings. While its stock underperformed during the SaaS downturn, operational results remain robust. The Microsoft 365 Commercial business is gaining momentum, with enterprises rapidly adopting its Copilot AI assistant. Last quarter, paid Copilot users surged 250% year-over-year to 20 million, and overall software revenue grew 17%. Additionally, Azure cloud computing revenue climbed 39%, and annual recurring AI revenue jumped 123%, driven by strong demand for GitHub’s agentic coding tools. Microsoft’s deep integration into enterprise workflows positions it as a key beneficiary of AI-driven transformation.

Image source: Getty Images.

2. ServiceNow: Powering Agentic AI Orchestration

Companies with strong ties to enterprise workflows are best positioned to thrive in an AI-driven landscape. ServiceNow (NYSE: NOW) exemplifies this through its platform used by IT departments to manage software ecosystems. Its configuration management database (CMDB) serves as a critical system of record, mapping relationships between hardware, software, cloud services, and business processes—a capability that is difficult to replicate. This foundation supports ServiceNow’s push toward agentic AI orchestration via its AI Control Tower solution, which identifies, monitors, and governs AI agents across enterprises. The company has maintained a revenue growth rate of 20%+ and is now leveraging AI to unlock new opportunities in an evolving market.

3. Salesforce: Enabling AI Agents with Clean Data

Salesforce (NYSE: CRM) is another SaaS leader embracing agentic AI. Known for dismantling data silos, the company has enhanced its capabilities through Data 360, a zero-copy solution that integrates data from internal systems and cloud providers without transfer costs. Its acquisition of Informatica further strengthens data structuring and governance—crucial for training effective AI agents. Salesforce’s Agentforce platform is gaining traction, though its impact on revenue remains nascent. Despite recent gains, the stock remains attractively valued, trading at a forward price-to-sales ratio of 3.5 and a forward P/E of 14 based on analyst estimates, offering investors a compelling entry point.

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